Washington update: Building bipartisan support for residence-based taxation

Dear supporters,

As Congress moves forward with plans to fast-track some domestic tax matters through a streamlined “reconciliation” bill", we have been working diligently to build bipartisan support for a standalone bill—Rep. Darin LaHood’s Residence-Based Taxation for Americans Abroad Act.

The reconciliation bill has just been released, and as we anticipated, the RBT proposal was not included.

A few months back, we were excited about the prospect of potentially piggybacking on a reconciliation bill. President Donald Trump has said that the bill, which is needed to extend some of the provisions of the Tax Cuts and Jobs Act from his first term, is a top priority.

Unfortunately, the reconciliation route has a number of traps called “Byrd rules” that limit proposals that can be included in the bill.  For example, provisions must have a revenue effect in order for the provision to be included and can’t have any effect on Social Security, which is the case with the self-employment tax.

Reconciliation bills also focus on a 10-year budget window.  As a result, tax provisions often have to be temporary, meaning that even a decision in favor of residence-based taxation might need to be re-approved every 10 years – clearly not the kind of certainty that overseas American want and deserve.  

Our priority: a lasting solution

Tax Fairness for Americans Abroad supports a lasting solution to the double-taxation woes of Americans abroad. That means ensuring that the new bill for the 119th Congress has bipartisan support and is as comprehensive as possible, including some provisions that go beyond revenue effects—for example, instructing the Internal Revenue Service  to provide a simplified compliance program for Americans abroad and to implement the optional RBT system in a timely manner once it is enacted.

We look forward to seeing the results of the Joint Committee on Taxation’s review of Mr. LaHood’s bill and then charting a path to adoption that Congressional Republicans and Democrats – in both the House and the Senate – can all support.

Sincerely,

Tax Fairness for Americans Abroad